Can You File Bankruptcy on Medical Bills in Michigan?

Yes, you can file bankruptcy on medical bills in Michigan—these debts are considered unsecured and can be discharged through Chapter 7 or reorganized under Chapter 13.

With decades of experience helping Michigan residents manage overwhelming medical debt, I’ve guided countless individuals through the bankruptcy process to regain financial control. In this article, I’ll explain exactly how medical debt is treated in bankruptcy, the difference between Chapter 7 and Chapter 13, and how to protect your financial future. When filing for bankruptcy, you must disclose all debts, including medical debt, to ensure they are included in the process.

How Does Bankruptcy Help With Medical Debt in Michigan?

Bankruptcy allows you to eliminate or reorganize medical bills, which are treated as unsecured debt.

In Michigan, unpaid medical bills are a leading cause of personal bankruptcy. These expenses—often incurred after surgeries, hospitalizations, or unexpected emergencies—are legally classified as unsecured debt, similar to credit card balances.

That means:

They are not tied to collateral (like a home or vehicle)
They can be wiped out in Chapter 7, or
Repaid through a court-supervised plan in Chapter 13

According to the National Library of Medicine, more than 60% of bankruptcies involve medical debt as a contributing factor. Bankruptcy offers a powerful way to stop the bleeding—ending collections and giving you a fresh start. Most creditors would prefer working with you on payment plans rather than going through bankruptcy court, so it’s worth discussing options with them first.

Key Insight: Medical bills are fully dischargeable in bankruptcy. They do not receive special treatment and are not considered priority debt.

Should I File Chapter 7 Bankruptcy for Medical Bills?

Chapter 7 bankruptcy discharges all qualifying medical bills quickly, usually within 4 to 6 months. There is no limit to the amount of medical debt that can be discharged under Chapter 7, making it a powerful tool for those overwhelmed by healthcare expenses.

Chapter 7 is ideal if you:

Have limited income
Own few non-exempt assets (note that non-exempt assets may be sold to repay creditors under Chapter 7, which can result in the loss of certain possessions)
Need a fast resolution to overwhelming debt

To qualify, you must successfully pass the means test, which evaluates your income against the Michigan median based on your household size. This test determines eligibility for Chapter 7 bankruptcy. If you qualify, medical debt and other unsecured debts are wiped out, and you walk away with a clean slate. Additionally, medical providers and collection agencies may waive a percentage of outstanding medical bills, so it’s worth exploring this option before filing.

The process involves:

Filing a petition with financial disclosures
Attending a creditor meeting (341 meeting)
Working with a court-appointed trustee

Michigan allows you to use state or federal exemptions to protect assets like your car, home equity, retirement accounts, and more.

Tip: You can protect your home equity using the Michigan Homestead Exemption (https://www.michigan.gov/ag/consumer-protection/home-ownership/homestead-property-tax-credit).

Should I Consider Chapter 13 Bankruptcy for Medical Debt?

Chapter 13 bankruptcy establishes a repayment plan lasting 3 to 5 years for medical and other debts, structured according to your income.

Chapter 13 is ideal for those who:

Earn too much to qualify for Chapter 7
Want to protect valuable assets (like a home with significant equity)
Need time to catch up on missed mortgage, car, or tax payments

Your medical bills are grouped with other unsecured debts and repaid only to the extent your disposable income allows. Under Chapter 13, you are required to pay all disposable income toward your debt during the repayment period. Once the plan ends, the remaining unpaid balances are discharged.

Advantages include:

Preventing foreclosure or vehicle repossession
Paying pennies on the dollar for medical debt
Keeping property you might otherwise lose in Chapter 7

Example: You may pay only 10% of your $40,000 in medical debt through Chapter 13—and discharge the rest.

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Does Bankruptcy Stop Medical Debt Collections?

Yes, filing for bankruptcy triggers the automatic stay, which immediately halts all collection activity.

This means:

Lawsuits stop
Wage garnishments are suspended
Harassing phone calls and bills cease

This protection lasts throughout the bankruptcy case and gives you time to resolve the debt without pressure.

If a creditor violates the automatic stay, they may face sanctions or penalties. That’s why it’s critical to file your bankruptcy before a lawsuit results in a judgment.

What Happens to My Credit After Filing Bankruptcy?

Your credit score will likely drop, but bankruptcy also gives you the opportunity to rebuild. Filing Chapter 7 or Chapter 13 bankruptcy can provide relief from medical bills but impacts credit scores. However, many clients see credit score increases within 12–24 months of discharge.

Chapter 7 stays on your credit report for 10 years
Chapter 13 remains for 7 years

The short-term impact can be significant, but many clients see credit score increases within 12–24 months of discharge.

Credit rebuilding strategies include:

Making on-time payments on remaining obligations
Applying for secured credit cards
Monitoring your credit report for errors

Tip: Bankruptcy clears old debt, which may improve your debt-to-income ratio—a key factor in credit scoring.

Can I Protect My Assets While Filing Bankruptcy in Michigan?

Yes, Michigan law provides exemptions to help you protect essential assets during bankruptcy.

Michigan residents can choose between state or federal exemptions. Here are key protections:

Asset	Michigan Exemption	Federal Exemption
Home Equity	Up to $46,125	$27,900
Vehicle	Up to $4,250	$4,450
Household Goods	Up to $625/item (max $3,975)	Up to $700/item (max $14,875)
Retirement Accounts	100%	100%

Note: Joint filers may double many exemption amounts to increase protection.

An experienced attorney can help you choose the best exemption set based on your assets and goals.

What Are the Alternatives to Bankruptcy for Medical Bills?

Before committing to bankruptcy, explore these options:

Many hospitals are open to negotiating directly, which can open up possibilities for debt relief. This may include discounts, payment plans, or other financial assistance programs.

1. Hospital Financial Assistance

Many Michigan hospitals offer charity care or income-based discounts. Contact the billing department to apply. Additionally, medical creditors may offer financial assistance programs to help reduce out-of-pocket costs, so it’s worth inquiring about these options.

2. Debt Settlement

You may be able to negotiate lump-sum payoffs at a discount. Be aware:

Settled debt may be taxable
There’s no legal guarantee creditors will cooperate

Alternatively, you can set up interest-free repayment plans with medical providers, which can make managing your debt more feasible.

Settled debt may be taxable
There’s no legal guarantee creditors will cooperate

3. Credit Counseling

Non-profit agencies can create a debt management plan (DMP) to consolidate payments. Credit counseling services can also help you establish a budget and develop a plan to manage your medical debt effectively.

Important: These options may help temporarily—but they don’t guarantee creditor protection like bankruptcy does.

When Should You File Bankruptcy for Medical Debt?

Consider bankruptcy if:

Medical debt exceeds 50% of your annual income
You’ve missed multiple payments or face lawsuits
Your income qualifies for Chapter 7 or a manageable Chapter 13 plan

Filing before a judgment is entered can protect you from wage garnishments and liens.

You should also file after incurring all foreseeable medical expenses, as you can’t include future debt in your petition.

How Medical Debt Impacts Michigan Families

Medical debt in Michigan doesn’t just affect your bank account—it can impact every part of your life. From skipped prescriptions to putting off critical care, many families delay medical decisions due to cost. Studies by the Kaiser Family Foundation have shown that medical debt can lead to housing instability, reduced access to credit, and even job loss due to health-related work absences.

In Michigan, where healthcare costs can vary widely between urban and rural areas, many people find themselves buried in debt from even routine procedures. Hospital emergency rooms must treat patients regardless of their ability to pay, but the resulting bills can still be overwhelming.

Bankruptcy offers a legal path to reset, but it’s crucial to understand how deeply medical bills can erode financial stability before deciding on next steps. You can also negotiate with medical creditors for a repayment plan or debt settlement as an alternative to bankruptcy.

If medical bills are forcing you to choose between rent and prescriptions, bankruptcy may provide the long-term solution you need.

What Happens to Collections and Lawsuits for Medical Debt?

If you’ve fallen behind on medical bills in Michigan, your account may be sent to collections or even result in a lawsuit. Once a creditor wins a judgment, they may be able to garnish wages, levy bank accounts, or place liens on property. However, some medical providers may refuse to treat patients after they declare bankruptcy, so it’s important to weigh all options carefully.

Filing for bankruptcy initiates an automatic stay, which immediately halts all collection efforts—including phone calls, wage garnishments, and ongoing lawsuits. In many cases, filing before a judgment is entered can help preserve your income and assets more effectively.

Don’t wait until you’re facing a court summons—talk to a bankruptcy attorney early to preserve your options.

Call Kostopoulos Bankruptcy Law for Trusted Legal Guidance

Struggling under the weight of medical bills? I’ve helped hundreds of Michigan residents wipe out healthcare debt and rebuild their financial lives. Let’s find out if bankruptcy is right for you.

Call (877) 638-0861 or schedule a free consultation online. We have offices in Flint and Warren to serve you.

There’s no shame in seeking help—only strength in taking back control.

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Frequently Asked Questions

What if I already have a judgment for unpaid medical debt?

Bankruptcy can still discharge the debt and remove most judgments, but it’s best to file before a judgment is entered.

Do I need to list every medical provider?

Yes. You must disclose all creditors—including hospitals, specialists, and labs—to include their debts in your case.

How long does it take to discharge medical debt through bankruptcy?

Chapter 7 usually takes 4–6 months. Chapter 13 lasts 3–5 years due to the repayment plan.

Can medical bankruptcy affect my job or professional license?

Filing bankruptcy is a legal right and typically does not impact employment or licensure. Most employers don’t even check.

Should I consult an attorney for medical bankruptcy?

Absolutely. A skilled bankruptcy attorney can help you maximize exemptions, avoid mistakes, and complete the process efficiently.

Can I include all types of medical bills?

Yes. Hospital bills, doctor fees, lab work, ambulance costs, and other medical-related charges are included.

Will I lose my house or car if I file for bankruptcy?

No, not if your equity is within Michigan’s exemption limits. Many filers keep their home and vehicle.

Can medical debt be wiped out in bankruptcy?

Yes. Medical bills are unsecured and fully dischargeable in both Chapter 7 and Chapter 13 bankruptcy.